The First-tier Tribunal has dismissed an application by HMRC to amend their Statement of Case prior to a hearing (The CBD Flower Shop Ltd v HMRC ( UKFTT 107 (TC)).
The CBD Flower Shop Ltd (CBD) had written to HMRC seeking their agreement that the cannabinoid products it sold should be classified as food and zero rated. HMRC did not agree and issued assessments which – following a review – CBD appealed. Subsequent to its initial filing of its Statement of Case, HMRC applied to amend this adding as further grounds for denying the zero rating that the product was illegal. CBD opposed the application arguing that it had been ambushed with a substantive new argument.
Based on case law precedents the tribunal considered the following matters:
- Chance of success – an application to amend should be refused if it is clear that the proposed amendment has no real prospect of success – the tribunal concluded here there was a chance of success as “their prospects can properly be described as being more than fanciful and better than merely arguable.”
- The degree of lateness and its impact on the process – a very late application places a heavy burden on the applicant to show the strength of the new case and the risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission – the tribunal concluded here that “although no hearing date has been lost, so the present case cannot be described as ‘very late’ … given that the amendment could have been advanced earlier it is clearly late … with the result that the appeal cannot be listed within the hearing window stated in the Case Management Directions.”
- Prejudice – here the tribunal had to strike a balance between injustice to the appellant and other litigants if the amendment was allowed and injustice to HMRC if the application was refused– the tribunal noted here “prejudice to HMRC is just one factor to be considered and will be a ‘much less important element of the balancing exercise’ where it has come about as a result, as it has in this case, of its failure to obtain advice in relation to the illegality issue sooner.”
The tribunal concluded “on balance and for the reasons above, particularly its timing and resulting prejudice to the appellant the application must be dismissed.”
The judge did not award costs to CBD as “even though I have concluded after hearing argument that the statement of case should not be admitted, I do not consider that it was unreasonable for it to have made the application.”
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